Management Accounting Systems: Essentials, Reporting, and Adaptations

This report provides a comprehensive analysis of management accounting (MA), focusing on its role in assisting managers with financial decisions. It covers the essentials of different types of management accounting systems, including cost accounting, inventory management, job-costing, and price-optimization systems, evaluating their benefits and applications within organizations. The report also explains various methods used for management accounting reporting, such as budgeting reports, performance reports, order information reports, job cost reports, graphic reports, accounts receivable aging reports, and inventory and manufacturing reports. Furthermore, it assesses cost and profitability aspects using absorption and marginal costing systems, demonstrating their impact on net profit. The advantages and disadvantages of planning tools like cash budgets, zero-based budgeting, and activity-based budgeting for budgetary control are also discussed. Finally, the report compares how organizations adapt management accounting systems to respond to financial problems, highlighting the principles of management accounting in addressing these challenges.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
P1. Explaining the management accounting and give essentials requirements of different types
of management accounting systems............................................................................................3
P2. Explaining different methods used for management accounting reporting...........................5
P3 Assessing cost & profitability aspects by using absorption and marginal costing system.....6
P4. Explaining the advantages and disadvantages of different types of planning tools used for
budgetary control.........................................................................................................................8
P5. Comparing how organizations are adapting management accounting systems to respond to
financial problems.......................................................................................................................9
An explanation of the principles of management accounting...................................................11
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
Management Accounting (MA) refers to the techniques which helps manager in taking
important financial decisions regarding long term and short term aspects. MA provides high level
of assistance in analysing data for future perspective so that organizational goals can be achieved
(Burritt and et.al., 2019). It is compulsory to assist management by evaluating efficiency and
control on segment of organisation. This study is based on Church's company was founded by
Thomas church in the year 1873 fall under the category of Private limited company is related to
high end English footwear manufacture. This study will cover management accounting and
essentials requirements of different types of accounting systems. Furthermore, it presents various
methods which used for reporting in MA. Besides this, it will discuss appropriate techniques to
prepare an income statement. Report also depicts planning tools utilized for budgetary control
along with the benefits and drawbacks It also highlights how accounting systems can be used to
respond financial problems.
P1. Explaining the management accounting and give essentials requirements of different types of
management accounting systems
Management Accounting- Different types of management accounting systems
Cost accounting systems- It is a structure used by firms to figure out cost of products for
analysis of profitability and cost control activities related to production using perfect inventory
system (Richardson and Yigitbasioglu, 2018). It may be called as accounting system is planned
for manufactures by tracking flow of stocks regularly through several stages of production.
Inventory management systems- It is the system in which include tracking of goods are
having in store, warehouse shelf and sale to distributors and retailers. It helps to check there
should be sufficient goods or raw materials to meet large demands without create any overstock
or extra inventory.
Job-costing systems- This system includes to accumulate information regarding costs
related with particular production or service job. It is necessary for deciding is a job is and helps
to company to make idea regarding value of labour, materials and overhead that may be used
while doing specific job.
Price-optimization systems- It is the system to analyse by company to focus that how
customers may react about different products or services via different channels. It may be called

as a strategy in which come to know that how clients are more sensitive regarding in changing
the prices of products and services.
Evaluating the benefits of management accounting systems and their application within an
organisational context.
Benefits of cost accounting system-
 It helps businesses accurately ascertain costs- To do this cost accounting depends on
different techniques like job, standard and process costing. It helps in cost assessment of
all facets of business which includes products, contracts, cost of processes or projects.
 It may improve cost efficiency- It has identified that it helps in improving cost
efficiency by creating competition between suppliers (TRUHACHEV, KOSTYUKOVA,
BOBRISHEV, 2017). It may inform better decision making- The main pros in which may inform better
decision making by developing better ideas and techniques to achieve maximum profits.
Advantages of inventory management system-
 Better Inventory Accuracy- It helps in improving inventory accuracy with solid stocks
and materials and may essential to meet demand.
 Reduced Risk of Overselling- It assists in reducing risk of overselling by tracking what's
in stock or backorder then may not sell products. Greater Insights- It involves tracking and the control of stock may be easily spot trends
of sales or recalled products or end dates.
Benefits of Job Costing Systems-
 It allows you to determine productivity- In the context of chosen company allows to
determine employee’s productivity by providing sufficient training. It may be possible
that one employee is more productive than others.
 It may help you avoid mistakes- This may help in avoiding mistakes before starting a
project. If you see at numbers then think that you are not getting enough pay, you may
turn it down and do focus on energy to take profitable opportunities. It may grow with your business- It may grow in business by construction and real estate
companies like large and small may use job costing to analyse costs and profits.
Benefits of Price optimization systems

 Get immediate financial benefits- In the context of an organisation is to give an
opportunity to do focus on various details in a shop. The main aim is to pay attention on
products packaging and importance of brand.
 Make decisions quicker based on data- The main focus of this company to make
decisions based on hard data not intuition. It may drive financial advantages immediately,
to do work with many categories at same time.
 Parallel working with many categories- In the context of selected company is to do
parallel work with various categories so that work load may be less. It all depends on
description of a given industry and products which may be sold.
P2. Explaining different methods used for management accounting reporting
Budgeting Reports- This method describes set out plan to determine company
performance by making evaluations regarding department's performance and costs control. It
provides benefits to employees to motivate to achieve desired results. This budget report assists
the company in evaluating the estimation for each department working and efficiency. This will
guide every department that how they can effectively work in order to attain the objective of the
department.
Performance reports- The another method is used for management accounting includes
differences are calculated on relation of actual outcome with budgeted performance which are
analysed and providing information about this are given in performance reports. This
performance report is very important for the company to analyse because it outlines the
performance of the employees. This report involves the performance level of every employee
and as a result of this company can evaluate its performance.
Order information report- It helps the management to understand that business may run
efficiently and impressive. The different types of reports are prepared in such type of reporting
helps in integration management operations to attain low cost by placing order and their
management. This report assist company in keeping a proper track of the orders which company
is taking and how they manage the order information in proper and effective manner.
Job cost reports- In this type of reporting it is generally focus on expenses, identifying
cost, productivity and profitability of particular job. This reports includes an evaluation may be
made regarding earning prospect of projects so that company may generate its efforts. These

reports also measure cost while project is in progress by this areas of waste may be taken care of
and also may be made profitable (Mahmoudian and et.al., 2021).
Graphic Reports- This may be presented by way of graphic reports which may give a
finer visual of data than long array of illustration given in statements. It involves the usual form
of graphic reports like charts, pictures and diagrams and has the advantage to facilitate fast grasp
of necessary trends by receiving of information. The graphic report helps company in taking
decision in proper and effective manner as graphs and pictorial presentation outlines the work in
more clear manner. This in turn improves the decision making process in proper and better
manner.
Accounts receivable aging report- This report will consider by managing account
receivables for those companies which are involved by extending credits to customers. An
analysis may be made regarding company's credit and its necessary to tighten credit policy. This
helps in reducing old bad debts and by maintaining liquidity of company.
Inventory and manufacturing reports- Companies may include in various types of
manufacturing process and in this types of reports inventory process may be more efficient. Also
these reports may contain per unit overhead, labor cost and wastages are concerned with
inventory provides to managers for comparison between various assembly lines. Also to check
opportunities by doing improvement which may be exploited by several departments and
employees.
A business situation or opportunity reports- This reports are maintained for
management with which they may be well focused of occurrence of a specific event. It helps
management by taking crucial business decisions so that they may achieve various results
regarding events.
P3 Assessing cost & profitability aspects by using absorption and marginal costing system
Marginal costing is the costing technique of management that is used to determine the best
possible production quantity of the company. The concept of marginal costing is to find the cost
of every additional unit of production.
On the other hand, absorption costing is used to find the overall cost of production of the
company. This method is used to absorb the total costs that are incurred to the products on the
basis of different factors. Through marginal costing, break-even point can easily be calculated
whereas it is not possible to calculate in absorption costing system.

Marginal costing
Particulars Amount
Sales(850*40) 34000
Variable costs
Direct Materials 15000
Direct Labour 7800
Variable production overheads 1950
Marginal cost 24750
Closing inventory(210*26) 5460
Fixed production overheads 5500
Cost of sales 24790
Gross profit 9210
Administrative and selling overheads 3500
Net profit 5710
Absorption costing
Particulars Amount
Sales(850*40) 34000
Variable costs
Direct Materials 15000
Direct Labour 7800
Total production overheads 6800
Absorption costs 29600
Closing inventory(210*29) 6090
Cost of sales 23510
Gross profit 10490
Administrative and selling overheads 3500
Net profit 6990
With the analysis of the above marginal and absorption costing it is clear that the net
profit is more under the absorption costing. Hence this implies that for the company the use of
absorption costing will be beneficial as it outlines more profit in comparisons that the other the
costing method. The reason underlying this fact is that the absorption costing undertakes all the
production cost and not only the variable cost. Thus, because of this reason it is advisable to the
company that they must go with the option of absorption costing.

P4. Explaining the advantages and disadvantages of different types of planning tools used for
budgetary control.
Cash Budget- In the context of ABF, cash budget is defined as a computation of cash
inflows and outflows for business or an individual over a particular period of time. A company
may use cash budget to measure that whether it has enough payment to continue operating over
specific time (Honggowati and et.al., 2017).
Advantage
The main advantage of cash budget in the context of chosen company avoid debt possible
is to spend cash you are having. This means you may set cash for such emergency problems,
other than you may find out in an awkward situation.
Disadvantage
In the context of ABF, cash budget creates danger of theft in which includes tracks cash
movements to defend against theft. It is very easy asset to buy, wholly because it is not so easy to
trace.
Zero based budgeting- This type of method include all expenses may be covered and
authorized for each and every new period and calculated on base of actual cost. Under this
method each and every activity are focused and explaining revenue so every cost may generate
for company.
Advantage
In the context of ABF involves it may help to customize budget and having needs to meet
each and every month then this method may give a way to tackle expenses effectively.
Disadvantage
Like other budget zero based budgeting may be costly and along with this its consume a
lot of time and complicated.
Activity based budgeting- This method of budgeting help in designing to provide larger
transparency into budget process (Latan and et.al., 2018). It generates revenue budget authority
by research and instructional activities which are allocated instantly to unit liable for activity.
Advantage
In the context of this company activity based budgeting method measures all cost and it
takes into intellect ion all steps are involved in an activity. The inapplicable activities are
destructed and only important activities are considered from a part of business.

Disadvantage
The main disadvantage of this company is to deep knowing of different functional areas
of business. The manager prepares budget is unable of discernment and measuring areas of
business, it may advantage to imprecise budget preparation.
P5. Comparing how organizations are adapting management accounting systems to respond to
financial problems
Benchmarking- It includes the process of regularly comparing and evaluating an
organization against its past performance and provides information that may help company to
improve its performance (Gunarathne, Lee and Hitigala Kaluarachchilage, 2021).
Purpose- Bench marking helps to improve practices which assist an organization to focus
on business activity and may provide effective training to employees so that the enterprise may
run efficiently.
The main advantage of this it works upon technological up gradation in which companies
know regarding new technology which are adopted by market leaders.
Sometimes Lack of understanding make a biggest disadvantage because without knowing
about anything it may create problem with other competitor.
Key performance indicators- The term is defined as a targets which help in measuring
progress against most strategic objectives and shows how any company may achieve business
goals (Cescon, Costantini and Grassetti, 2019).
Purpose- It helps to evaluate the performance of business and to know about successes
and failures of an enterprise. For example, KPIs in operations and finance focus on ratios, ROI,
or lead time etc.
The main pros in this is to gain efficiency in communication because it is an essential part
of every organization effective skills show ability of any employee to increase their profits.
The con is that it takes time to display any transformation of a team in a day because they
don't judge before seeing results.
Variance analysis- It indicates the study of deviations of potential behavior versus for
planned or forecast end activity in budgeting or management accounting (Turner and et.al.,
2017).
Purpose- It helps to manage annual budget by watching budgeted figures and comparison
with actual cost.

The main benefit of is to assist an organization to be pro-active to achieve business
targets and to aid in mitigating and identifying any possible risks which finally builds trust
generate among team unit to present what is planned.
The disadvantage of this type is too costly because it includes investigating and
calculating variance and so reporting them is complexed.
Financial Governance- It means how companies may track financial transactions, data
control, and manage performance, operations etc. (Alvarez and et.al., 2021).
Purpose- It permits organizations to identify and reduce risk and costs as well as
germination of effort.
It facilitates to make better decision-making so that company productivity and
profitability may increase.
It is called as costly activity because of controlling and evaluating cost, financial
management express different financial control tools.
Balance scorecards- It aids companies to identify their internal operations to assist external
outcomes. It evaluates performance data and provides feedback on how may take better decisions
(Zyznarska-Dworczak, 2018)
Purpose- It permits companies to study and collect data from many areas involving
growth and learning, focus on customers and finance.
The advantage in the context of company is to make communication easy among team
members and departments so that everyone may understand to each other.
The disadvantage is to require a lot of data because sometimes balance scorecards need
team members and managers to do report information means logging information.
Church’s New Balance
This company follows cost accounting system
because it’s helpful in identify how an
organization is spending their money.
This company follows Inventory management
system because may assist company to modify
order times and may track their popular
products.
This company use benchmarking and key
performance indicators system to give reply to
This company use financial governance and
balance scorecards.

financial problems.
An explanation of the principles of management accounting. Designing and Compiling- In management accounting includes records, statements and
evidence of present, past or future results may be designed to meet need of specific
business or problem. It means this system is made in such a way by presenting relevant
data so that a particular problem may be solved (Chaudhry and Amir, 2020). Management by exception- The principle of management by exception follow when
showing information to management that means standard costing techniques and
budgetary control system are regulated in accounting system. Control at source accounting- Costs are the best controlled at source accounting in
which include performance of individual workers, utilization of services such as power,
vehicles, powers and maintenance.
 Utilization of Resources- the main principle is how to utilize resources and those
resources are available should be efficiently used. And to ensure that getting things done
in right time or manner (management accounting, 2021) Integration- this is another principle under management accounting which assist the
company in integrating all the information relating to business for taking proper decision.
The reason underlying this fact is that under management accounting all the accounting
information are integrated and then analyzed for proper decision making. This in turn
assist company in taking proper decision for better and effective working of company.
CONCLUSION
From the above information, it can be summarized that management accounting includes
the preparation of reports regarding business operations may help managers to make short and
long term decisions. This study has concluded Church's company make footwear items and sale
in large area. This report has been included various types of management accounting system like
cost accounting, job costing, inventory management and price optimization systems, which
provides several benefits such as it helps businesses accurately ascertain costs and may improve
cost efficiency. Furthermore, it has completed different methods used for management
accounting reporting like budget, performance reports. Moreover, this study has been covered
different types of planning tools used for budgeting tools such as cash, zero based budgeting

which includes advantages like it may avoid debt and customize budget to fit particular needs.
Comparison of how organizations are adapting management accounting system to respond to
financial problems.